What's mined is yours, but taxed accordingly

Q My sister and I inherited mineral rights left to us by my mother, who received them when my father died about 1978. I accepted an offer from a buyer this year on my portion of the minerals. They sent me a cheque, and my sister kept the mineral rights to receive a share of future royalties. How much capital gains would I pay on the proceeds from those minerals?

A Assets inherited are treated differently for capital gains tax purposes, depending on when the original owner acquired them. For assets purchased by the deceased after September 20, 1985, will be treated as being purchased by the person who inherits the asset at the same cost originally paid by the deceased.

Assets purchased before September 20, 1985, will be regarded as being purchased by the person who inherits them at their market value at the date of death of the deceased. As your mother inherited the mineral rights in 1978, the value for capital gains tax purposes for your sale will be the market value at your mother's death.

Once you've established the value of your share of the mineral rights you will pay capital gains tax on the difference between the sale proceeds you received and that cost. If you held the mineral rights for longer than 12 months you will pay tax on 50 per cent of the gain made. This assessable gain will be added to your other income in that year, taxed at the applicable marginal rate.

Q When a child inherits a property and wishes to keep it, understanding that if the property was sold then CGT is payable, does he or she pay any tax simply at the inheritance stage?

A There is no tax payable by anyone at the time they inherit an asset. Where assets held in the estate of a deceased are sold, and then cash is distributed to the beneficiaries instead of property, tax can be payable by the estate.

If the property was the deceased's home, it can be kept for up to two years and sold without capital gains tax payable. If the property is held for longer than two years and then sold, capital gains could be payable unless the new owner occupied it as their home.

Q I am receiving a transfer of property from my uncle to me as a gift with no consideration. What taxes am I subjected to?

A There are no gift duties or taxes for the receiver. Your uncle could be subject to capital gains tax depending on when he bought the property. If it was before September 20, 1985, no tax will be payable.

For income tax purposes a valuation should be obtained at the date of the transfer. This can be used to calculate tax payable on any capital gain made by your uncle. It would also be the basis for calculating future capital gain made by you. The value will be counted as an asset by Centrelink purposes for your uncle for five years.

Questions can be emailed to super@taxbiz.com.au. Max Newnham's book, Funding your Retirement, is available in shops and as an e-book.